Corporation Tax Act 2009 section 604

Credits and debits treated as relating to capital expenditure

Section 604 ensures that derivative contract amounts capitalised into the carrying value of an asset or liability are still brought into account for corporation tax purposes as income items, rather than being hidden within the capital cost of the asset or liability.

• Where accounting standards allow a derivative contract amount to be capitalised into the carrying value of an asset or liability, and no corporation tax profit or loss on that asset or liability will be calculated using accounting rules, the amount must still be recognised as a taxable credit or deductible debit in the period it arises.
• This requirement overrides the accounting treatment so that derivative contract gains and losses are taxed or relieved on an income basis, even if the accounts treat them as part of a capital item.
• An exception applies where the asset in question is an intangible fixed asset subject to a fixed-rate writing-down election under section 730, in which case the capitalised amount is not redirected to income.
• Where a debit is brought into account as income under this section, no further debit may be claimed for any subsequent write-down, amortisation or depreciation of the asset or liability to the extent that write-down is attributable to the same amount — this prevents a double deduction.